A specialty coffeehouse sells Colombian coffee at a fairly steady rate of 65 pounds per week – If the firm uses the continuous review system to control the inventory, what would be its order quantity and reorder point

Problem 1

Chapter 9: A specialty coffeehouse sells Colombian coffee at a fairly steady rate of 65 pounds per week. The beans are purchased from a local supplier for $4 per pound. The coffeehouse estimates that it costs $50 in paperwork and labor to place an order for the coffee, and the annual holding cost is 20% of the purchasing price. (Use 52 weeks/year)

  1. What is the economic order quantity (EOQ) for Colombian coffee?
  2. What is the optimal number of orders per year?
  3. What is the optimal interval (in weeks) between the orders?

 

Problem 2

Chapter 9: A store has collected the following information on one of its products:

  • Demand = 6,760 units/year
  • Standard deviation of weekly demand = 18 units
  • Ordering costs = $40/order
  • Holding costs = $2/unit/year
  • Cycle-service level = 90%
  • Lead-time = 3 weeks
  • Number of weeks per year = 52 weeks

 

  1. If the firm uses the continuous review system to control the inventory, what would be its order quantity and reorder point?
  2. Assume that the firm decided to change to the periodic review system to control the item’s The time between reviews, P, is calculated using the EOQ model. For the most recent review, an inventory clerk checked the inventory of this item and found 500 units. There were no scheduled receipts or backorders at the time. Determine how many units should the firm order.

 

Problem 3

Chapter 10: Auto Data produces custom engineering testing equipment. The following six orders are currently in the design department:

 

 

Job

Time Since Arrival (weeks ago) Process Time (weeks) Due Date (weeks from now)
A 5 2 7
B 6 8 16
C 7 4 4
D 4 10 17
E 2 5 15
F 3 12 18

 

  1. Create a schedule using the first-come first-serve (FCFS) rule, calculating the average flow time and average weeks past
  2. Create a schedule using the earliest due date (EDD) rule, calculating the average flow time and average weeks past
  3. Which rule gives the best schedule based on average flow time and average weeks past due?

 

Problem 4

Chapter 11: a) Complete the inventory record below for an FOQ of 200 units and lead time 2 weeks.

  1. b) Discuss weaknesses of List at least three and explain each in a sentence or two.

 

Item: A Lot Size: 200 units
Lead Time: 2 weeks
Week
1 2 3 4 5 6 7 8
Gross Requirements 120 150 110 150 130 160 130 150
Scheduled Receipts 200 200 0 0 0 0 0 0
Projected On-hand Inventory           50
Planned Receipts
Planned Order Releases

 

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